Which of the following ratios is unaffected by the choice between translation under the all-current method and remeasurement under the temporal method? A) Quick ratio. B) Inventory turnover. C) Accounts payable turnover. D) Current ratio. Am I being really stupid or are A and C both correct?
It’ been more than 15 minutes since I’ve studied FSA which means my post is probably wrong. However: I think you’re looking for a pure balance sheet ratio. (D). If Sales or COGS is in the numerator and a balance sheet item in the denominator then it will be impacted. However I’m probably wrong.
Isn’t C - Accounts Payable Turnover affected by the choice because in the formula is COGS / Payables, and COGS under the temporal method is determined at historical cost, but under the all current method at the average rate?
A. current ratio includes inventory, which may be valued differently. SO not D
I think the answer is only A because all assets and liabilities on the BS in the all current method use the current exchange rate and all the monetary assets and liabilities on the BS for temporal method also use the current exchange rate. Can’t remember if there was any difference in how sales was converted i.e. with which exchange rate (don’t have the notes in front of me and my memory is not serving me either) – knowing that would help determine if C could also be the correct answer.
A only includes stuff from income statement 1luv
Ahh. thanks kellyima. I was thinking accounts payable turnover was sales/ Av. Accounts payable When its actually COGS/ Av. accounts payable. COGS is clearly dependent on the all-current vs temporal decision.
A Differences between all current and temporal mainly deal with nonmonterary assets A) Quick ratio. CA-CL/CL
What is the answer?
A